Bitcoin Price Sheds $300 as Investors Digest Chinese Crackdown

The price of Bitcoin continued falling on Tuesday to shed another $300, as investors worried about the effect of a recent Chinese crackdown on cryptocurrencies. Bitcoin had skyrocketed to about $5,000 on Saturday, but the virtual currency crashed following the announcement of new regulations for initial coin offerings in China.

Chinese regulators said on Monday that a ban is placed on new projects that use Bitcoin and its alternatives to raise cash or virtual currencies. Authorities released a document that stated that initial coin offerings will now be viewed as fraudulent practices.

Initial coin offerings are commonly used in China as a fundraising tool, forming an industry that peaked at about $1.27 billion in 2017. Chinese startups often rely on initial coin offerings to raise funds by offering new digital tokens to the market. However, local news outlet Caixin reported that regulators are concerned that this method of raising funds may be a breeding ground for financial scams.

A joint statement that was issued by the People’s Bank of China, China Securities Regulatory Commission, and other government bodies reiterated that ICOs are an illegal fundraising activity.

ICOs have been endorsed by a number of celebrities, including Paris Hilton. However, the lack of regulations similar to those tied to more traditional methods like selling shares made many investors fall victims to scams linked to this fundraising method.

Analysts believe that traders’ tendency to collect profits near psychologically important levels also added to Bitcoin’s decline. The price of Bitcoin lost almost $1,000 since it traded within a $30 range from the $5,000 mark on Sunday. Other cryptocurrencies also suffered losses, including Ripple, Ethereum, and Bitcoin Cash, which erased more than $30 billion off the total cryptocurrencies value.

Worries that rapid increases in the Bitcoin price could be forming a bubble continued to linger between investors, who are anticipating a solid support level for the cryptocurrency.

BTC/USD traded at 4,268.3 on the Bitstamp exchange as of 15:30 GMT on Tuesday after touching a low of 4,004.6, which was the pair’s lowest level since August 23. BTC/USD began trading today at 4,261.2.

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